On Wednesday 26th March, The Chancellor Rachel Reeves delivered her Spring Statement, setting out the government's plans against a backdrop of growing global uncertainty. It was encouraging to see no new tax increases for businesses announced today – a welcome decision, particularly given the already confirmed changes taking effect from April.
Here are the key takeaways from The Spring Statement:
- Growth forecasts: The OBR predicts steady GDP growth from 2026 (1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029). Real household incomes are expected to grow at double the rate forecast in the autumn.
- Welfare reforms: Reductions to certain benefits will be introduced, with £1bn allocated for employment support and £400m to enhance jobcentre services.
- Public spending: Defence spending will increase to 2.5% of GDP, with significant investment in AI, drone technology, and infrastructure to drive efficiency. £200m will be directed towards nuclear submarine jobs in Barrow, with additional support for naval ports and military housing. A new £3.25bn "transformation fund" will also be used to improve public service efficiency, alongside a planned 15% reduction in civil service costs by the end of the decade.
- Housing & planning: Ambitious reforms aim to deliver 1.3 million new homes over the next five years, boosting GDP by a projected £15bn by 2030.
- Inflation: Forecast to fall sharply, reaching the Bank of England's 2% target by 2027.
- No new tax rises announced today, though HMRC will increase its focus on tackling tax avoidance, aiming to raise an additional £1bn.
While the Spr Statement brought no fresh tax increases, previously announced reforms will soon take effect and may significantly impact your business:
- Employer National Insurance Contributions (NICs) rise from 13.8% to 15%.
- The NICs threshold drops from £9,100 to £5,000, increasing costs for many SMEs.
- The National Minimum Wage rises to £12.21/hour, with increases for younger workers and apprentices.
In real terms, one full-time minimum wage employee will cost an employer £2,632 more per year when combining wage and NICs increases – more than £50 per week. For employees earning £30,000, NICs will increase by £865 per year; for those on £50,000, by £1,106.
For a detailed recap of upcoming tax changes announced in the Chancellor's 2024 Budget, you can read more here.
If you'd like to discuss how these changes affect your business, please contact your Champion advisor – we're here to support you every step of the way.